FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On May 26, 2022, Penn State announced that a health study commissioned by the Pennsylvania Department of Environmental Protection (PADEP) to examine the environmental and human health impacts of spreading conventional oil and gas produced water (OGPW) as a dust suppressant concluded the practice is ineffective for that purpose and poses dangers to the environment and human health. See News Release, Tim Schley & Ashley J. WennersHerron, Penn State Coll. of Eng’g, “Oil and Gas Brine Control Dust ‘No Better’ than Rainwater, Researchers Find” (May 26, 2022). The announcement coincided with PADEP’s finalization of the study. See William Burgos et al., Penn State Univ., “Evaluation of Environmental Impacts from Dust Suppressants Used on Gravel Roads” (May 26, 2022) (Study).
Historically, road spreading OGPW was authorized in Pennsylvania, but PADEP placed a moratorium on the practice in response to a 2018 legal challenge and subsequent decision by the Environmental Hearing Board. See Lawson v. PADEP, EHB Docket No. 2017-051-B (May 17, 2018). In accordance with Pennsylvania solid waste laws, using OGPW on roads for dust control could continue if conventional operators demonstrated the chemical makeup of the wastewater was similar to commercially available dust suppressants.
The Study assessed the effectiveness and environmental impacts associated with various dust suppressants used on dirt and gravel roadways, which included testing synthetic rainwater, calcium chloride (CaCl2) brine, soybean oil, and OGPW from three conventional oil and gas operations.
PADEP presented the study results at the July 25, 2022, Oil and Gas Technical Advisory Board meeting. In sum, the study found that OGPW is no more effective than rainwater as a dust suppressant on roadways, likely due in part to OGPW’s high sodium concentrations, which can affect how OGPW “sticks” to dust particles. Further, the study showed OGPW actually destabilized gravel roadways, which could lead to more dust and increased long-term road maintenance costs. According to the study results, only CaCl2-based brines and soybean oil were effective dust suppressants, with the study’s rainfall-runoff experiments showing that CaCl2-based brines led to the lowest concentration of total suspended solids washed off the roadbeds. Study at 9.
The study also found that runoff from spreading OGPW on unpaved roadways contained concentrations of barium, strontium, lithium, iron, and manganese that exceeded human-health based criteria and levels of radioactive radium that exceeded industrial discharge standards. In addition, most contaminants contained in the applied dust suppressants washed from the roadbed during rain events. However, roadbeds treated with OGPW retained traces of radium, sodium, iron, and manganese after rainfall events and had the highest concentration of combined radium in runoff. Id. at 9–10. The study supports Penn State’s conclusions from a similar peer-reviewed study published in 2021. See Audrey M. Stallworth et al., “Efficacy of Oil and Gas Produced Water as a Dust Suppressant,” 799 Sci. of the Total Env’t 149347 (2021).
On September 20, 2022, PADEP informed the Citizens Advisory Council (CAC) that analysis of brine as a co-product submitted by conventional operators to allow for spreading on roadways for dust control did not meet the state’s residual waste regulations. PADEP is currently updating waste disposal and handling standards for conventional operations and a draft rulemaking is expected to be presented to oil and gas advisory committees following the December 18, 2022, Pennsylvania Grade Crude Development Advisory Council meeting. See Meeting Minutes, CAC (Sept. 20, 2022); PADEP, “October 2022 Report to the Citizens Advisory Council” (Oct. 2022). A report from PADEP detailing, among other things, conventional operators’ compliance with state environmental and regulatory requirements was due to the Governor’s Office on September 1, 2022, but has not been made public as of the time of this report. See 52 Pa. Bull. 4229 (July 30, 2022).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Oil & Gas
(By Joseph Reinhart, Sean McGovern, Matthew Wood and Gina Falaschi)
On September 16, 2022, the U.S. Court of Appeals for the Third Circuit affirmed a district court ruling that Pennsylvania state legislators and municipalities lacked standing to challenge the Delaware River Basin Commission’s (DRBC) regulation banning hydraulic fracturing for natural gas within the basin. Yaw v. DRBC, 49 F.4th 302 (3d Cir. 2022), aff’g No. 2:21-cv-00119, 2021 WL 2400765 (E.D. Pa. June 11, 2021); see Vol. XXXVIII, No. 3 (2021) of this Newsletter. The court held that the appellants failed to meet the standing requirements of Article III of the U.S. Constitution because: (1) in the case of the state senator appellants, individual members of the state legislature lack standing to assert the interests of the legislature as a whole; and (2) in the case of the municipality appellants, their alleged injuries were “conjectural” or “hypothetical,” as opposed to “actual” or “imminent.” The court also held that none of the appellants had standing as trustees of Pennsylvania’s public natural resources under the Environmental Rights Amendment to the Pennsylvania Constitution because the DRBC’s ban has not cognizably harmed the trust.
The five-member DRBC is governed by a compact between the federal government and four states that draw water from the Delaware River: Pennsylvania, New Jersey, Delaware, and New York, represented by a member of the U.S. Army Corps of Engineers and each state’s governor, respectively. See Delaware River Basin Compact, Pub. L. No. 87-328, 75 Stat. 688. The DRBC has authority to approve, construct, operate, and regulate projects and facilities that use the basin’s water resources. It can also address issues outside the basin if they have a substantial effect on the basin’s water quality and water supply and if the issues conflict with the DRBC’s comprehensive plan. See Cong. Research Serv., “Federal Conservation of the Delaware River” (Mar. 18, 2015).
The Third Circuit’s decision follows the DRBC’s February 2021 vote to ban hydraulic fracturing in the basin, which had been under a de facto moratorium since 2010. In support of the ban, the DRBC found that hydraulic fracturing for extraction of oil and natural gas “poses significant, immediate and long-term risks to the development, conservation, utilization, management, and preservation” of water resources within the basin. Yaw, 49 F.4th at 307. Following the ban, Pennsylvania legislators and municipalities filed suit, arguing that the DRBC overstepped its legal authority. Among other things, they alleged the ban “violated the Takings Clause of the United States Constitution, illegally exercised the power of eminent domain, and violated the Constitution’s guarantee of a republican form of government.” Id.
Acknowledging that challenges are likely to continue, the court noted that its ruling is narrow. It said that although the legislators and municipalities lack standing, they can attempt to seek redress of the issues by other means, such as requesting that the DRBC reverse the ban, seeking to amend the compact, or persuading a party with standing to assert the institutional injuries. Id.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
The Supreme Court of Pennsylvania has upheld a preliminary injunction of the Regional Greenhouse Gas Initiative (RGGI) rule granted by the Commonwealth Court of Pennsylvania. On July 8, 2022, the commonwealth court granted a preliminary injunction preventing the state from participating in RGGI pending resolution of the case. See Vol. 39, No. 3 (2022) of this Newsletter. Governor Tom Wolf appealed the injunction to the supreme court. On August 31, 2022, the supreme court denied the state’s emergency request to reinstate the automatic supersedeas, thereby maintaining the preliminary injunction while litigation on the merits proceeds before the commonwealth court later this year. See Ziadeh v. Pa. Legis. Reference Bureau, No. 79 MAP 2022 (Pa. Aug. 31, 2022).
As previously reported in Vol. 39, No. 2 (2022) of this Newsletter, the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program rule, or RGGI rule, which links the state’s cap-and-trade program to RGGI, was published in the Pennsylvania Bulletin in April 2022. See 52 Pa. Bull. 2471 (Apr. 23, 2022). RGGI is the country’s first regional, market-based cap-and-trade program designed to reduce carbon dioxide (CO2) emissions from fossil fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.
On April 25, 2022, owners of coal-fired power plants and other stakeholders filed a petition for review and an application for special relief in the form of a temporary injunction, and a group of state lawmakers filed a challenge as well. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 MD 2022 (Pa. Commw. Ct. filed Apr. 25, 2022). Briefing has been completed and a hearing is expected to occur in November 2022.
Additionally, on July 12, 2022, natural gas companies Calpine Corp., Tenaska Westmoreland Management LLC, and Fairless Energy LLC filed a third legal challenge to the rule with arguments similar to those brought in the other two cases. See Calpine Corp. v. PADEP, No. 357 MD 2022 (Pa. Commw. Ct. filed July 12, 2022). Constellation Energy Corporation and Constellation Energy Generation LLC have petitioned to intervene in the case and a hearing on this application was scheduled for November 2, 2022. Briefing in this case is due in December 2022.
Further information regarding the rule and the history of the rulemaking can be found on PADEP’s RGGI webpage at https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
As reported in Vol. 55, No. 3 (2022) of the Water Law Newsletter, the Pennsylvania House and Senate Environmental Resources and Energy standing committees (Standing Committees) and the Independent Regulatory Review Commission (IRRC) recently disapproved a proposed rulemaking to change the water quality criterion for manganese in Pennsylvania. The future of the rulemaking is now uncertain.
Proposed Changes to Manganese Water Quality Criterion
The proposed manganese rule would add a numeric water quality criterion for manganese of 0.3mg/L to Table 5 at 25 Pa. Code § 93.8c, which is intended to “protect human health from the neurotoxicological effects of manganese.” Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). Section 93.8c establishes human health and aquatic life criteria for toxic substances, meaning the Pennsylvania Department of Environmental Protection (PADEP) would be regulating manganese as a toxic substance. The existing criterion of 1.0 mg/L, which was established in 25 Pa. Code § 93.7 as a water quality criterion, would be deleted. The 0.3 mg/L criterion would apply to all surface waters in the commonwealth. PADEP identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth.” Executive Summary at 3.
PADEP also specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expects that mining operators would need to perform additional treatment to meet this criterion. Id. Final amendments to treatment systems would be implemented through PADEP’s permitting process and other approval actions. Consulting and engineering firm Tetra Tech estimated the overall cost to the mining industry to achieve compliance with the 0.3 mg/L standard “could range between $44–$88 million in annual costs (that is, for active treatment systems using chemical addition for manganese removal) and upwards of $200 million in capital costs.” Comment and Response Document at 213, “Water Quality Standard for Manganese and Implementation” (Aug. 9, 2022).
Rulemaking History
The Pennsylvania Environmental Quality Board (EQB) adopted the proposed rulemaking in December 2019. See Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). This rulemaking was prompted by the addition of subsection (j) to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, by Act 40 on October 30, 2017. Act 40 directed the EQB to promulgate regulations under Pennsylvania’s Clean Streams Law, 35 Pa. Stat. §§ 691.1–.1001, and related statutes to require that the water quality criteria for manganese established under 25 Pa. Code ch. 93 be met.
On June 30, 2020, PADEP submitted a copy of the proposed rulemaking to the IRRC and to the chairpersons of the Standing Committees for review and comment. The proposed rulemaking was published in the Pennsylvania Bulletin on July 25, 2020, 50 Pa. Bull. 3724, with a 60-day public comment period that closed on September 25, 2020. Comments were received from 957 commenters, including testimony from 13 witnesses at the public hearings. Since the proposed rulemaking, PADEP met with the Mining and Reclamation Advisory Board, the Aggregate Advisory Board, the Public Water Systems Technical Assistance Center Board, and the Water Resources Advisory Committee to discuss the proposed rule. On August 9, 2022, the EQB voted to adopt the final manganese rule.
Recent Disapproval of Proposed Manganese Criterion and Possible Next Steps
After the EQB adopted the manganese rule as final at its August 9 meeting, the rulemaking was sent to the Standing Committees and the IRRC. The IRRC received over 30 comments on the rulemaking and heard in-person testimony from numerous interested parties, including members of the regulated industry. The Standing Committees and the IRRC each voted to disapprove the rulemaking in early September. See IRRC, “Regulation #7-553: Water Quality Standard for Manganese and Implementation,” http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3271.
Because of these disapprovals, the manganese rule was not sent immediately to the Office of the Attorney General for final approval. Instead, the rule was sent back to the EQB, who can choose to withdraw the regulation or resubmit it—with or without changes—to the IRRC and the Standing Committees within 40 days. If the EQB resubmits the rulemaking, the IRRC will hold a second public meeting within 15 days, and the Standing Committees then receive the rulemaking and can issue a concurrent resolution disapproving the regulation within 14 days. If the Standing Committees do not issue a concurrent resolution, the rulemaking can become final after the Attorney General’s approval. If the Standing Committees do issue a concurrent resolution, the rulemaking is sent to the General Assembly for a vote. If the General Assembly adopts the concurrent resolution, the General Assembly presents it to the Governor to sign or veto. If the General Assembly does not adopt the concurrent resolution, the rulemaking is sent to the Attorney General, who can approve the rulemaking. The regulation becomes final at publication in the Pennsylvania Bulletin. See 71 Pa. Stat. § 745.7; IRRC, “The Regulatory Review Process in Pennsylvania,” at 17–22 (2019).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
In late July 2022, the Pennsylvania Department of Environmental Protection (PADEP) published its Non-Regulatory Agenda, which outlines the agency’s upcoming plans related to its documents, manuals, and technical guidance. The Non-Regulatory Agenda outlines the agency’s intent to rescind its Engineering Manual for Mining Operations, TGD No. 563-0300-101 (Jan. 1, 1999), by the end of this year. The agenda also notes PADEP’s intent to revise several other technical guidance documents (TGDs) related to coal mining activities in the commonwealth. The TGDs identified by PADEP to be revised in early 2023 are:
- Surface Water Protection – Underground Bituminous Coal Mining Operations, TGD No. 563-2000-655 (Oct. 8, 2005);
- Financial Assurance and Bond Adjustments for Mine Sites with Post-Mining Discharges, TGD No. 563-2504-450 (Dec. 15, 2007) (draft);
- Increased Operation and Maintenance Costs of Re-placement Water Supplies (on All Coal and Surface Noncoal Sites), TGD No. 562-4000-102 (Dec. 2, 2006);
- Water Supply Replacement and Permitting, TGD No. 563-2112-605 (Dec. 31, 1998); and
- Water Supply Replacement and Compliance, TGD No. 562-4000-101 (Oct. 18, 1999).
Draft revisions will be published in the Pennsylvania Bulletin and should be available online at https://www.depgreenport. state.pa.us/elibrary/GetFolder?FolderID=4556. The public will have an opportunity to comment on these draft revisions for a period of at least 30 days.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Mineral and Energy Law Newsletter
Pennsylvania – Mining
(By Joseph Reinhart, Sean McGovern, Gina Falaschi and Christina Puhnaty)
On November 12, 2022, the Pennsylvania Environmental Quality Board (EQB) published amendments to the Pennsylvania Department of Environmental Protection’s (PADEP) regulations in 25 Pa. Code chs. 121 and 129 for all major stationary sources of nitrogen oxides (NOx) or volatile organic compound (VOC) emissions, which is commonly known as the RACT III rule. See 52 Pa. Bull. 6960 (Nov. 12, 2022). The rule requires major sources of either or both of these air pollutants in existence on or before August 3, 2018, to meet reasonably available control technology (RACT) emission limits and requirements by January 1, 2023. See also Vol. 39, No. 1 (2022) of this Newsletter (Pennsylvania – Oil & Gas report).
These regulations are being promulgated to address federal Clean Air Act (CAA) RACT requirements to meet the 2015 ozone National Ambient Air Quality Standards (NAAQS) in the commonwealth. The CAA requires a reevaluation of RACT when new ozone NAAQS are promulgated. RACT is required in nonattainment areas, including the Ozone Transport Region, which includes Pennsylvania. The RACT III rulemaking establishes presumptive RACT requirements and emission limits for specific source categories of affected facilities. The RACT III rulemaking also imposes additional requirements for all major sources of NOx and/or VOCs, not just those subject to the presumptive RACT requirements and limitations.
RACT III applies to all major sources of VOCs and NOx. Because the commonwealth is in the Northeast Ozone Transport Region, the major source threshold is 50 tons per year (tpy) of VOCs and 100 tpy of NOx. PADEP estimates that 425 title V facility owners and operators will be subject to the final rule. Affected source categories include combustion units; process heaters; turbines; stationary internal combustion engines; direct-fired heaters, furnaces, or ovens; and other sources that are not regulated elsewhere under chapter 129. The sources included in these categories are located at various facility types, including fossil fuel-burning and other electric generation, petroleum and coal products manufacturing, and iron and steel milling. RACT III imposes presumptive RACT limitations at 25 Pa. Code § 129.112 on additional categories of facilities that were not previously subject to any presumptive RACT limitations or requirements. These categories include glass melting furnaces, lime kilns, and certain combustion units.
The owner or operator of a NOx air contamination source with a potential emission rate equal to or greater than 5.0 tpy of NOx for which presumptive RACT requirements are not outlined in section 129.112 is required to propose a NOx RACT requirement or RACT emission limitation to PADEP. Similarly, the owner or operator of a VOC air contamination source with a potential emission rate equal to or greater than 2.7 tpy of VOCs for which presumptive RACT requirements are not outlined in section 129.112 is required to propose a VOC RACT requirement or RACT emission limitation to PADEP.
Notably, 25 Pa. Code § 129.115 requires that all major VOC or NOx emitting facilities submit a written notification to PADEP or the appropriate local air pollution control agency by December 31, 2022, identifying air contamination sources at the facility as covered by—or exempt from—RACT III requirements. This written notification requirement applies to all major sources of NOx and VOC emissions, even if those facilities are not subject to the presumptive RACT provisions of section 129.112. The written notification must include the following for each identified air contamination source:
- a description of each identified air contamination source at the facility, including make, model, and location;
- the applicable RACT requirement or RACT emission limitation;
- how the owner or operator will comply with the application RACT requirement or RACT emission limitation; and
- the reason why a source is exempt from the RACT requirements and RACT emission limitations, if applicable.
Operators are not required to immediately amend operating permits to include RACT III, but as of January 1, 2023, the final rulemaking will apply to those sources covered by the rulemaking. As of this compliance date, RACT III’s requirements could supersede any conflicting requirements and emissions limitations in a facility’s permit or Pennsylvania regulations, unless those conflicting requirements are more stringent than RACT III. See 25 Pa. Code § 129.112(l)–(m).
The EQB adopted the proposed rulemaking in May 2021. The proposed rulemaking was published for public comment, see Vol. XXXVIII, No. 4 (2021) of this Newsletter, and PADEP held public hearings on the proposal. PADEP reviewed and responded to comments on the proposed rule and presented the final rule to the EQB at its August 9, 2022, meeting, where it was approved. Upon approval, the regulation was submitted to the Pennsylvania House and Senate Environmental Resources and Energy standing committees and the Pennsylvania Independent Regulatory Review Commission (IRRC). The standing committees approved the regulation on September 14, 2022, and the IRRC approved the regulation on September 15, 2022. The regulation was then approved by the Office of the Attorney General before being published in the Pennsylvania Bulletin. PADEP will now submit the regulation to the U.S. Environmental Protection Agency (EPA) for incorporation into Pennsylvania’s state implementation plan.
The RACT III compliance date established by EPA is January 1, 2023, and this regulation went into effect immediately upon publication in the Pennsylvania Bulletin. Owners and operators should take note of the impending December 31, 2022, notification deadline described above.
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
FNREL Water Law Newsletter
(By Lisa Bruderly and Christina Puhnaty)
In early September 2022, the Pennsylvania House and Senate Environmental Resources and Energy standing committees (Standing Committees) and the Independent Regulatory Review Commission (IRRC) disapproved the proposed rulemaking to change the water quality criterion for manganese in Pennsylvania. The future of the rulemaking is now uncertain.
Proposed Changes to Manganese Water Quality Criterion
The proposed manganese rule would add a numeric water quality criterion for manganese of 0.3 mg/L to Table 5 at 25 Pa. Code § 93.8c, which is intended to “protect human health from the neurotoxicological effects of manganese.” Executive Summary at 1, “Final-Form Rulemaking: Water Quality Standards and Implementation—Manganese” (Aug. 9, 2022). Section 93.8c establishes human health and aquatic life criteria for toxic substances, meaning the Pennsylvania Department of Environmental Protection (PADEP) would be regulating manganese as a toxic substance. The existing criterion of 1.0 mg/L, which was established in 25 Pa. Code § 93.7 as a water quality criterion, would be deleted. The 0.3 mg/L criterion would apply to all surface waters in the commonwealth. PADEP identified the parties affected by the manganese rule to be “[a]ll persons, groups, or entities with proposed or existing point source discharges of manganese into surface waters of the Commonwealth.” Executive Summary at 3.
PADEP also specifically identified “[p]ersons who discharge wastewater containing manganese from mining activities” as affected parties, and expects that mining operators would need to perform additional treatment to meet this criterion. Id. Final amendments to treatment systems would be implemented through PADEP’s permitting process and other approval actions. Consulting and engineering firm Tetra Tech estimated the overall cost to the mining industry to achieve compliance with the 0.3 mg/L criterion “could range between $44–$88 million in annual costs (that is, for active treatment systems using chemical addition for manganese removal) and upwards of $200 million in capital costs.” Comment and Response Document at 213, “Water Quality Standard for Manganese and Implementation” (Aug. 9, 2022).
Rulemaking History
The Pennsylvania Environmental Quality Board (EQB) adopted the proposed rulemaking in December 2019. See Proposed Rulemaking Preamble, “Water Quality Standard for Manganese and Implementation” (Dec. 17, 2019). This rulemaking was prompted by the addition of subsection (j) to section 1920-A of the Administrative Code of 1929, 71 Pa. Stat. § 510-20, by Act 40 on October 30, 2017. Act 40 directed the EQB to promulgate regulations under Pennsylvania’s Clean Streams Law, 35 Pa. Stat. §§ 691.1–.1001, and related statutes to require that the water quality criteria for manganese established under 25 Pa. Code ch. 93 be met.
On June 30, 2020, PADEP submitted a copy of the proposed rulemaking to the IRRC and to the chairpersons of the Standing Committees for review and comment. The proposed rulemaking was published in the Pennsylvania Bulletin on July 25, 2020, 50 Pa. Bull. 3724, with a 60-day public comment period that closed on September 25, 2020. Comments were received from 957 commenters, including testimony from 13 witnesses at the public hearings. Since the proposed rulemaking, PADEP met with the Mining and Reclamation Advisory Board, the Aggregate Advisory Board, the Public Water Systems Technical Assistance Center Board, and the Water Resources Advisory Committee to discuss the proposed rule. On August 9, 2022, the EQB voted to adopt the final manganese rule.
Recent Disapproval of Proposed Manganese Criterion and Possible Next Steps
After the EQB adopted the manganese rule as final at its August 9 meeting, the rulemaking was sent to the Standing Committees and the IRRC. The IRRC received over 30 comments on the rulemaking and heard in-person testimony from numerous interested parties, including members of the regulated industry. The Standing Committees and the IRRC each voted to disapprove the rulemaking in early September. See IRRC, “Regulation #7-553: Water Quality Standard for Manganese and Implementation,” http://www.irrc.state.pa.us/regulations/RegSrchRslts.cfm?ID=3271.
Because of these disapprovals, the manganese rule was not sent immediately to the Office of the Attorney General Office for final approval. Instead, the rule was sent back to the EQB, who can choose to withdraw the regulation or resubmit it—with or without changes—to the IRRC and the Standing Committees within 40 days. If the EQB resubmits the rulemaking, the IRRC will hold a second public meeting within 15 days, and the Standing Committees then receive the rulemaking and can issue a concurrent resolution disapproving the regulation within 14 days. If the Standing Committees do not issue a concurrent resolution, the rulemaking can become final after the Attorney General’s approval. If the Standing Committees do issue a concurrent resolution, the rulemaking is then sent to the General Assembly for a vote. If the General Assembly adopts the concurrent resolution, the General Assembly presents it to the Governor to sign or veto. If the General Assembly does not adopt the concurrent resolution, the rulemaking is sent to the Attorney General, who can approve the rulemaking. The regulation becomes final upon publication in the Pennsylvania Bulletin. See 71 Pa. Stat. § 745.7; IRRC, “The Regulatory Review Process in Pennsylvania,” at 17–22 (2019).
Copyright © 2022, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
Pittsburgh Business Times
In March, the Securities and Exchange Commission (SEC) released a proposed rule entitled Enhancement and Standardization of Climate-Related Disclosures for Investors. If finalized, this rule would become some of the first mandatory Environmental, Social and Governance (ESG) reporting requirements for U.S. companies, requiring the disclosure of climate-related risk information in registration statements and periodic reports.
This proposed regulation has significant consequences not just for public companies, but private companies as well. Babst Calland Environmental Attorney Gina N. Falaschi explains the implications of the proposed rules, should they take effect.
What requirements could the rules introduce?
Under the SEC proposal, public companies would be required to disclose the oversight and governance of climate-related risk by their board and management; how any climate-related risk has a material effect on business and consolidated financial statements; the process for identifying, assessing and managing climate-related risks and how to integrate those processes into the company’s overall risk management; whether the company has adopted a transition plan to deal with climate-related risks and how to measure any physical or transitional risks to its operations; the effect of severe weather events and related natural conditions; and information regarding any publicly set climate-related targets or goals.
The SEC’s proposal also requires the disclosure of certain greenhouse gas emissions. These emissions are divided into three categories based on the Greenhouse Gas Protocol definitions. Scope 1 emissions are the direct greenhouse gas emissions that occur from sources that a company owns or controls, such as emissions from manufacturing activities and vehicles. Scope 2 emissions are the indirect greenhouse gas emissions that occur from the generation of energy that a company buys and consumes in its operations. Scope 3 emissions are the result of assets not owned or controlled by a company that the company indirectly impacts in its value chain, both upstream and downstream, from the company’s operations, such as the purchased goods and services, waste generation, business travel, downstream transportation, distribution and use of products sold, and the end-of-life treatment of products sold. Scope 3 emissions would have to be disclosed only if considered “material.”
What do companies need to do to prepare?
While the regulation has not yet been finalized, many companies could be required to begin compliance in the near future, so it’s prudent that both publicly traded and privately held companies consider the implications of this proposed rule.
Publicly traded companies may need to consider how the disclosed information will be used. The assumption is that forced disclosure will make companies change their behavior and reduce emissions. But it could also open companies to significant liability, including shareholder litigation.
Climate disclosures are surrounded by a degree of uncertainty, especially in anticipating climate impact. Scope 3 emissions calculations require many assumptions about human behavior and estimates to derive at a final number. These emissions also may be counted multiple times by different companies in the same value chain for a particular product.
This rule also requires companies to submit extensive amounts of information, which may require them to hire new personnel or outside consultants to analyze and report the required data to the SEC.
How are private companies affected?
Private companies may be asked by their publicly traded customers to estimate or account for their greenhouse gas emissions, which may also require them to hire outside consultants to assist with calculations and data gathering.
Additionally, this new rule will likely become a standard by which all companies are evaluated. Having ESG disclosures may make companies more attractive to customers and put private companies without ESG disclosures at a competitive disadvantage.
Although intended to drive companies to become greener, the new required disclosures may discourage companies from going public. ESG matters also will likely become a meaningful component of M&A transactions, and due diligence efforts will need to take into account the impact that a potential merger or acquisition will have on its climate disclosures.
ESG is a rapidly developing area of law. Business leaders should work with legal counsel and sustainability consultants when developing both voluntary and mandatory climate-related disclosures to mitigate risks related to these disclosures.
To view the full video with Gina Falaschi on this topic and other articles on current business issues and trends, visit www.pittsburghbusinesstimes.com/babstcalland. To learn more about Babst Calland and its environmental practice, go to www.babstcalland.com.
To view the full article and PDF, click here.
To view the full article and video, click here.
Business Insights is presented by Babst Calland and the Pittsburgh Business Times.
Smart Business
(By SBN Staff featuring Gina Falaschi)
In March, the Securities and Exchange Commission (SEC) released a proposed rule entitled Enhancement and Standardization of Climate-Related Disclosures for Investors. If finalized, this rule would become some of the first mandatory Environmental, Social and Governance (ESG) reporting requirements for U.S. companies, requiring the disclosure of climate-related risk information in registration statements and periodic reports.
This proposed regulation has significant consequences not just for public companies, but private companies as well.
Smart Business spoke with Gina N. Falaschi, an associate at Babst Calland, about the implications of the proposed rule, should it take effect.
What requirements could the rule introduce?
Under the SEC proposal, public companies would be required to make a number of disclosures related to their climate-related risks and impact. Those include disclosures regarding the oversight and governance of climate-related risk by their board and management, how any climate-related risk has a material effect on business and consolidated financial statements, and information regarding any publicly set climate-related targets or goals.
The SEC’s proposal also requires the disclosure of certain greenhouse gas emissions, which are divided into three categories. Scope 1 emissions are the direct greenhouse gas emissions that occur from sources that a company owns or controls. Scope 2 emissions are the indirect greenhouse gas emissions that occur from the generation of energy that a company buys and consumes in its operations. Scope 3 emissions are the result of assets not owned or controlled by a company that the company indirectly impacts in its value chain, both upstream and downstream from the company’s operations. Scope 3 emissions would have to be disclosed only if considered ‘material.’
What do companies need to do to prepare?
While the regulation has not yet been finalized, many companies could be required to begin compliance in the near future, so it’s prudent that both publicly traded and privately held companies consider the implications of this proposed rule.
Publicly traded companies may need to consider how the disclosed information will be used. The assumption is that forced disclosure will make companies change their behavior and reduce emissions. But it could also open companies to significant liability, including shareholder litigation.
Climate disclosures are surrounded by a degree of uncertainty, especially in anticipating climate impact. Scope 3 emissions calculations require many assumptions about human behavior and estimates to derive at a final number. These emissions also may be counted multiple times by different companies in the same value chain for a particular product.
This rule also requires companies to submit extensive amounts of information, which may require them to hire new personnel or outside consultants to analyze and report the required data to the SEC.
How are private companies affected?
Private companies may be asked by their publicly traded customers to estimate or account for their greenhouse gas emissions, which may also require them to hire outside consultants to assist with calculations and data gathering.
Additionally, this new rule will likely become a standard by which all companies are evaluated. Having ESG disclosures may make companies more attractive to customers and put private companies without ESG disclosures at a competitive disadvantage.
Although intended to drive companies to become greener, the new required disclosures may discourage companies from going public. ESG matters also will likely become a meaningful component of M&A transactions, and due diligence efforts will need to take into account the impact that a potential merger or acquisition will have on its climate disclosures.
ESG is a rapidly developing area of law. Business leaders should work with legal counsel and sustainability consultants when developing both voluntary and mandatory climate-related disclosures to mitigate risks related to these disclosures.
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The American College of Environmental Lawyers (ACOEL)
(By Donald C. Bluedorn II)
On November 3, 2022, Pennsylvania Governor Wolf signed House Bill 1059, which amends the Commonwealth’s Tax Reform Code and, among other things, establishes the Pennsylvania Economic Development for a Growing Economy (“PA EDGE”) program, consisting of tax credits for four economic areas. https://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?sYear=2021&sInd=0&body=H&type=B&bn=1059.
Much of the publicity around the bill has focused on the tax credits available to promote a “hydrogen hub” and the use of hydrogen-based technologies. Indeed, the bill provides for tax credits up
to $50 million per year, or a total of $1 billion over a 20-year period.
In explaining his support for House Bill 1059, Governor Wolf started by noting his belief in the importance of the role of hydrogen in addressing the effects of climate change. “In its most recent report, the Intergovernmental Panel on Climate Change notes that ‘hydrogen is a promising energy carrier for a decarbonized world,’ and highlights hydrogen’s potential to ‘provide low-carbon heat for industrial processes or be utilized for direct reduction of iron ore.’” https://www.governor.pa.gov/wp-content/uploads/2022/11/20221103-1059.pdf.
The Governor then went on to note his belief that the use of hydrogen must be tied responsibly to the reduction of emissions and the consideration of Environmental Justice.
That said, I recognize that in order for hydrogen to play a meaningful role in reducing emissions, we must ensure that hydrogen used is truly “clean” through stringent emissions standards. We must also commit to strong and equitable community protections to prevent impacts to already overburdened communities and to guide benefits to communities that need them.
Perhaps the most controversial provisions of the bill, or at least those that drew the most attention in much of the press, were the provisions that also authorized a tax credit for the use of natural gas in the manufacturing of petrochemicals or fertilizers. In explaining his support for these provisions, the Governor highlighted his belief that these were stop-gap measures to help build a bridge to the future.
Relatedly, [the bill] also authorizes a tax credit based on the use of natural gas. This provision was included as a short-term fail-safe in the event that a manufacturing facility is constructed and clean hydrogen is not initially available. While I do not believe that it would be possible for a project facility that has been funded as part of a DOE regional clean hydrogen hub to utilize natural gas instead of hydrogen for a significant duration of time, the bill requires a company applying for the credit to sign a commitment letter stating the date by which it will begin to purchase clean hydrogen. It is my expectation that this period of time would not exceed a year or two.
In addition to its focus on hydrogen technology, House Bill 1059 also provides tax credits for Pennsylvania milk processing, biomedical manufacturing and research, and semiconductor manufacturing. In his statement, the Governor expressly recognized the need for even more support of semiconductor manufacturing in the Commonwealth. “This program is a first step to help chip manufacturers and their suppliers build new facilities in Pennsylvania, but we need to continue to invest in order to make Pennsylvania a leader in this industry.”
Founding Father Benjamin Franklin reportedly wrote that “in this world nothing can be said for certain, except death and taxes.” With the benefit of 21st Century hindsight, perhaps we can add hydrogen, natural gas, and climate change to the list . . . ?
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Reprinted with permission from the November 28, 2022 ACOEL Blog.
Legal Intelligencer
(by Alex Farone and Janet Meub)
Navigating the Family and Medical Leave Act (FMLA) in the COVID era, including the pandemic-related amendments, has felt like a minefield for many employers. Now that the surge of COVID-related uses of FMLA leave has largely passed, a new aspect of statutory compliance is emerging as a hot-button issue: treatment of remote workers under the FMLA.
The FMLA provides eligible employees with up to 12 weeks of protected, unpaid leave per year for qualifying family or medical reasons. In order to be eligible for FMLA coverage, four elements must be met:
- The employer is a covered employer under the Act, meaning it has at least 50 employees for at least 20 weeks in the current or previous year;
- The employee must have worked for the employer for at least 12 months, not necessarily consecutively;
- The employee must have worked at least 1250 hours in the last 12-month period; and
- The employee must be employed at a worksite where the employer employs at least 50 employees within a 75-mile radius.
Many employers do not pay much consideration to the last element, also known as the “50/75 Rule,” likely because the first element requires 50 employees and in the majority of instances those 50 employees are by default going to work within a 75-mile of the employer’s office. However, in the COVID era and beyond, more and more employees are permitted to work remotely on a full-time basis, and employers are hiring remote employees all over the country, regardless of the location of the employer’s physical office or operations.
The FMLA itself does not address remote workers, but the Department of Labor’s regulations specify that an employee’s personal residence is not a worksite for employees who work at home by telecommuting. 29 C.F.R. § 825.111(a)(2). Further, “[f]or employees with no fixed worksite … the worksite is the site to which they are assigned as their home base, from which their work is assigned, or to which they report.” Id.
In many instances, the remote employee’s home base, worksite from which their work is assigned, and worksite to which they report are one and the same—a single location such as a main office. For example, suppose a new data processing company has 100 employees and one physical office, located in Pennsylvania from which all management employees operate on-site. The company’s low-level data entry employees work remotely, and the company has been rapidly hiring employees nationally without regard to their state of residence. If a remote data entry employee in California seeks FMLA leave, the Company must determine her eligibility. Does the Company employ 50 employees within 75 miles of the office, which is the employee’s home base, the location from which her work is assigned, and to which she reports? If 20 employees work in the office, 10 more work remotely nearby in Pennsylvania, and 70 work remotely throughout the country, more than 75 miles away from the Office, then the 50/75 Rule has not been met, and the employee is not eligible for FMLA coverage.
Things get much more complicated, however, if the employer has multiple locations or if supervisors themselves work remotely. When passing the FMLA, the Senate indicated that the term “worksite” was intended to be interpreted in the same manner as the term “single site of employment” under the Worker Adjustment and Retraining Notification Act (WARN) and its regulations. See Sen. Rep. No. 103-3 at 23 (1993). So, when a remote employee’s worksite is not obvious, we look to case law interpreting the WARN Act to determine what it means for a worksite to be the site: (1) to which the employee is assigned as their home base; (2) from which their work is assigned; or (3) to which they report.
The Third Circuit provided a clear interpretation in Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d 139 (3d Cir. 1998). Per Ciarlante, a remote employee’s “home base” must be, at a minimum, a location at which the employee would be physically present at some point during a typical business trip. It refers to the physical base of the employee, rather than to the physical base of the employer’s operations. A remote employee’s “assigning site” is the source of the day-to-day instructions given to the employee. It is not determined by the location of centralized payroll or other centralized managerial or personnel functions. Instead, it is the location of the workers who are ultimately responsible for creating work tasks—the source of instructions, rather than a mere conduit location through which instructions are passed to the employee. Finally, a remote employee’s “reporting site” is the location of the personnel who are primarily responsible for reviewing reports and other information sent by the employee to assess performance, record tasks completion, etc.
Needless to say, determining a remote employee’s worksite for purposes of analyzing FMLA eligibility under the 50/75 Rule is fact-intensive and case-specific. Employers who are particularly at risk of incorrectly applying the 50/75 Rule or granting FMLA leave to employees who are not actually eligible are: (1) employers with over 50 employees, all of whom work on-site, but are spread out over multiple locations that may not be within 75 miles of one another; and (2) employers with few physical locations but many remote employees who live in multiple states. The Third Circuit has not yet analyzed the 50/75 Rule for remote workers in the current era of now-standard employment of remote employees. The U.S. District Court for the Eastern District of Pennsylvania analyzed the issue back in 2013, but in the context of a remote employee’s transfer to another position and reporting location around the time of her requested FMLA leave. O’Donnell v. Passport Health Communs., 2013 U.S. Dist. LEXIS 51432, 2013 WL 1482621 (E.D. Pa. Apr. 10, 2013). Therefore, employers in this jurisdiction are left largely without guidance from controlling case law as to the legal worksite of remote employees under the FMLA.
It is more than just best practice for employers to get up to speed on the FMLA’s 50/75 Rule application to remote workers—their legal defense of any potential claim depends on it. In a claim for FMLA violation (typically either interference or retaliation), employers may assert the defense of good faith, which means the act or omission that allegedly violated the FMLA was done in good faith and that the employer had reasonable grounds for believing the act or omission was not a violation of the FMLA. See 29 U.S.C. § 2617(a). The FMLA does not define “good faith,” so courts look to the Fair Labor Standards Act for its interpretation of this phrase. Under this interpretation, good faith requires a duty to investigate potential liability and more than reliance on ignorance.
One recent case in another jurisdiction underscored just how substantial the burden is on employers to successfully invoke the good faith defense. See Landgrave v. ForTec Med., Inc., 581 F. Supp. 3d 804 (W.D. Tex. 2022). In January of 2022, a District Court in the Fifth Circuit granted an FMLA-leave-seeking plaintiff’s partial motion for summary judgment to deny her employer’s affirmative defense of good faith. The plaintiff was a remote employee, and the employer had denied her request for FMLA leave, deeming her ineligible under the 50/75 Rule based on their interpretation of the plaintiff’s worksite. Despite this denial, the plaintiff took a leave of absence from work to care for her ailing mother. As she had no available leave to use, her employer deemed her to have voluntarily resigned her position when she failed to report to work by a date certain. The plaintiff claimed that the employer failed to investigate the FMLA’s applicability to remote workers before ending her employment.
The employer’s Human Resources Manager testified that she had no knowledge of the FMLA’s treatment of remote workers and that she did not seek legal counsel regarding FMLA eligibility. She did review the employee handbook’s requirements of FMLA eligibility, which mentioned a requirement of 50 “employees in the work or reported-to location” to reach the decision that the plaintiff did not qualify for FMLA protection. However, the court agreed with the plaintiff that this investigation into FMLA eligibility was insufficient to constitute “good faith” on the part of the employer. Specifically, the court stated that referring to an employee handbook for guidance on how to assess FMLA eligibility of a remote employee does not relieve an employer of its duty to investigate the employee’s rights where the handbook does not address the treatment of remote workers.
Employers should consult legal counsel any time a remote employee seeks FMLA leave to determine if the 50/75 Rule is met. In turn, counsel should specifically inform their employer clients of the 50/75 Rule and ensure that the 50/75 Rule is represented in company policies or handbooks concerning FMLA eligibility for remote workers specifically. Additionally, employers should keep a regularly-updated list of the cities and states in which all remote employees live, to more quickly calculate the number of employees within 75 miles of a particular worksite.
Alexandra Farone is an associate in the Litigation and Employment and Labor groups of Babst Calland. Ms. Farone’s employment and labor practice involves representing corporate clients, municipalities, and individuals on all facets of employment law, including restrictive covenants, discrimination claims, human resources counseling, grievances, and labor contract negotiations. Please contact her at 412-394-6521 or afarone@babstcalland.com.
Janet Meub is senior counsel in the Litigation and Employment and Labor groups of Babst Calland. Ms. Meub has significant experience in the areas of employment and labor law, professional liability defense, insurance coverage and bad faith litigation, toxic tort litigation, nursing home negligence, and medical malpractice defense. She has a diversified practice that includes defending employers, healthcare providers, law enforcement and other professionals, and non-profits, at all levels of civil litigation through trial. Contact her at 412-394-6506 or jmeub@babstcalland.com.
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Reprinted with permission from the November 17, 2022 edition of The Legal Intelligencer© 2022 ALM Media Properties, LLC. All rights reserved.
PIOGA Press
Sources for below article: Pennsylvania Oil & Gas Landowner Alliance (POGLA) Post – November 6, 2022, Senator Yaw Press Release dated 11/7/22, and ‘Pennsylvania General Assembly Enacts Senate Bill to Amend Oil and Gas Lease Act’ alert by Babst Calland published on 11.8.22
(By Chelsea Heinz and Devlin Carey)
Legislation aimed at ensuring landowners are afforded a clear and distinct assessment of royalties paid to them through lease agreements with oil and natural gas operators has been signed by Governor Tom Wolf.
On November 3, 2022, the Pennsylvania General Assembly enacted Senate Bill 806, which amends the Oil and Gas Lease Act of 1979 (P.L. 183, No. 60). The new act seeks to increase transparency around the payment of royalties from oil and natural gas operators to landowners pursuant to their lease agreements.
Senator Gene Yaw (R-23) believes the act will address recent concerns among landowners regarding the way in which royalties are being calculated, described and ultimately paid.
“Concerns have been expressed by land and mineral owners for some time now centered on the lack of transparency that can come with deductions from their royalty payments,” Yaw said. “In some cases, general deductions with little to no description are subtracted from landowner’s checks, leaving them with a fraction of what was promised. “My legislation would not impact lease agreements, but it would require entities making payments to landowners to provide more description, clarity and uniformity on their royalty check statements, something I’ve heard a great deal about from leaseholders across our region,” Yaw said. “This proposal is designed to help ensure all parties feel their lease agreements are executed as intended, and it will help mitigate concerns that have developed in recent years.”
Senate Bill 806, now Act 153 of 2022, was supported by various agencies and organizations, including the Pennsylvania Farm Bureau, the Pennsylvania Oil and Gas Landowner Alliance, the Marcellus Shale Coalition, Bounty Minerals, the Pennsylvania Independent Oil & Gas Association and the Pennsylvania Grade Crude Oil Coalition.
“Pennsylvania Farm Bureau thanks Sen. Yaw for his diligent and persuasive advocacy on an issue of long-standing importance to our members,” said Rick Ebert, Pennsylvania Farm Bureau President. “Senate Bill 806 would provide much-needed clarity and certainty to Pennsylvania farmers about the royalties paid to them through lease agreements with oil and natural gas operators. We also thank the other stakeholders for their critical work throughout this process.” “The Pennsylvania Oil and Gas Landowner Alliance thanks Senator Yaw for sponsoring SB 806, which will provide check stub consistency and transparency for royalty owners,” said Robert Sher, POGLA president. “The Senator persistently sought input from all interested parties and advocated on behalf of the bill. Our organization is grateful for his efforts. “
“Senator Yaw has always been a tireless proponent for his constituents and all of the land and mineral owners of the Commonwealth,” said Bounty Minerals Director of Business Development Valerie M. Antonette. “Bounty Minerals was proud to partner with him to get SB 806 over the finish line after an eight-year campaign to bring more transparency to royalty statements. Ultimately, it was a cooperative effort between all stakeholders working together.”
Oil and natural gas operators should be aware of the following provisions of the act, which will take effect on Friday, March 3, 2023:
Definitional Changes
Section 1 of the act clarifies the scope of ownership interests by replacing the 1979 act’s original, broadly defined “interest owner” term with a more precise “royalty owner” term. The act defines a “royalty owner” as “any owner of oil or gas in place or oil or gas rights, subject to a lease covering such oil or gas in place or oil or gas rights.” This includes owners who: (1) are entitled to share in the production of the oil or gas under their leasing agreements; or (2) have an interest in oil or gas in place or oil and gas rights but who have not entered into a lease (provided that such owner is not an “operator” under 58 Pa.C.S. §3203).
Expanded Check Stub Requirements
Section 2 of the act increases payors’ informational responsibilities for the check stubs they provide to royalty owners and differentiates these requirements for production of oil, natural gas and natural gas liquids from conventional and unconventional formations.
For conventional wells, these requirements include specifying:
- A name, number or combination of name/number that identifies the lease, property, unit or well(s) for which payment is being made; and the county in which the lease, property or well is located.
- Month and year of oil, gas or natural gas liquids production for which payment is being made.
- Total barrels of crude oil or number of Mcf of gas or volume of natural gas liquids sold.
- Price received per barrel, Mcf/gallon.
- Total amount of severance and other production taxes and other deductions permitted under the lease, with the exception of windfall profit tax.
- Net value of total sales from the property less taxes and deductions from paragraph (5).
- Royalty owner’s interest, expressed as a decimal or fraction, in production from paragraph (1).
- Royalty owner’s share of the total value of sales prior to deduction of taxes and deductions from paragraph (5).
- [Interest] Royalty owner’s share of the sales value less the royalty owner’s share of taxes and deductions from paragraph (5).
- Contact information, including an address and telephone number.
For unconventional wells, these requirements include specifying:
- Total barrels of crude oil or number of Mcf/MMBtu of gas and volume of natural gas liquids produced and sold from each well.
- The price received by the payor per unit of oil, natural gas and natural gas liquids produced and sold.
- Aggregate amounts for each category of deductions for each well incurred by the payor which reduces the royalty owner’s payment, including all severance and production taxes.
- The net and gross value of the payor’s total sales of oil, gas and natural gas liquids from each well (minus any deductions).
- The relevant royalty owner’s legal and contractual interest in the payor’s share, along with the royalty owner’s share of: (1) the gross value of the payor’s total sales before any deductions; and (2) the sales value minus the royalty owner’s share of taxes and any deductions.
Upon the mutual consent of the parties, the act requires payors to furnish royalty owners with summary statements setting forth each of the prescribed informational requirements. Once a royalty owner makes a written request for summary statements under the act, the payor must provide such statements from the month of the notice and each month thereafter, as well as for any prior period requested by the royalty owner.
If a payor fails to provide the payment information required by the act, a royalty owner may make a written request for the same. If a payor fails to respond within 60 days after receiving said request, the act gives royalty owners a cause of action for enforcing the provisions of the act and a right to recover attorneys’ fees and court costs.
The act permits payors to provide the required payment information electronically if a royalty owner has historically received such information electronically or upon mutual written consent by the parties.
Timing of Payments
Unless a lease specifies otherwise, payors of royalties from production from unconventional formations must make payments to royalty owners: (1) no later than 120 days from the date of the first sale of oil, gas or natural gas liquids; and (2) for all subsequent sales, within 60 days after the end of the month when the production is sold. A payor’s failure to make timely payments in accordance with the act shall incur interest (unless otherwise provided for in the applicable lease).
For payors of royalties from production from conventional formations, the timing of payments continues to be governed by the leases.
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Reprinted with permission from the November 2022 issue of The PIOGA Press. All rights reserved.
PIOGA Press
(By Gary Steinbauer, Gina Falaschi and Christina Puhnaty)
On October 14, 2022, the U.S. Environmental Protection Agency published a proposed rule that would require all emission sources subject to the Agency’s major New Source Review (NSR) permitting program to consider fugitive emissions when evaluating whether a new source or physical or operational change triggers the stringent major NSR permitting requirements. 87 Fed. Reg. 62,322 (Oct. 14, 2022) (Proposed Rule). The treatment of fugitive emissions, i.e., those “which could not reasonably pass through a stack, chimney, vent, or other functionally equivalent opening,” under the major NSR permitting program has been controversial for decades. While EPA predicts that the Proposed Rule will have limited impact on the regulatory community, EPA and state air permitting authorities may now place even greater pressure on industry to predict and quantify “fugitive emissions” from physical or operational changes to their facilities.
The major NSR permitting program is the Clean Air Act’s permit program that applies to the construction of new “major sources” and “major modifications” (i.e., qualifying physical or operational changes) to existing “major sources.” Applicability determinations under the major NSR program often rely heavily on predicted emissions from a new source or planned physical or operational changes to an existing source. When the new or existing source is located in an area that is in attainment with the Clean Air Act’s national ambient air quality standards (NAAQS), the major NSR program’s Prevention of Significant Deterioration (PSD) requirements apply. More stringent requirements, known as non-attainment NSR requirements, apply when the source will be or is located in an area that is not meeting one or more of the NAAQS. The Proposed Rule would impact all “major stationary sources,” regardless of whether they are located in areas that are meeting or not meeting the NAAQS.
The Proposed Rule would formally repeal EPA’s “2008 Fugitive Emissions Rule,” which provides that only “listed” industrial source categories are required to consider fugitive emissions when determining whether a physical or operation change is subject to major NSR permitting requirements. See 73 Fed. Reg. 77,881 (Dec. 19, 2008). The 28 “listed” industrial source categories referenced in the 2008 Fugitive Emissions Rule include, among others, iron and steel mills, Portland cement plants, petroleum refineries, coke oven batteries, certain fossil-fuel-fired power plants, and certain petroleum storage and transfer units. Effectively, the 2008 Fugitive Emissions Rule allowed non-listed industrial source categories to consider only non-fugitive emissions when evaluating major NSR permitting applicability.
Shortly after the 2008 Fugitive Emissions Rule went into effect in early 2009, environmental groups submitted a petition for reconsideration, after which EPA issued and extended multiple stays of the 2008 Fugitive Emissions Rule. As a result, since late- 2009, the 2008 Fugitive Emissions Rule has been stayed and the regulations predating it have remained in effect.
In addition to proposing to formally repeal the 2008 Fugitive Emissions Rule, EPA is seeking to remove a regulatory exemption that has been on the books since 1980. This “1980 exemption” provides that a physical or operational change is not considered a “major modification” subject to NSR permitting requirements if the physical or operational change is considered “major” solely due to fugitive emissions and the change is occurring at a facility within a non-listed industrial source category. In the Proposed Rule, EPA states that the 1980 exemption was inadvertently retained between 1989 and 2008, despite other EPA interpretations providing that all “major” sources are to account for fugitive emissions when evaluating major NSR permitting applicability. EPA acknowledges that the 1980 exemption “has created significant uncertainty about the EPA’s treatment of fugitive emissions in the major modification context.” 87 Fed. Reg. at 62,328.
The Proposed Rule may be part of an emerging trend of EPA revisiting decades-long controversies related to fundamental aspects of the Clean Air Act permitting programs. In a late September 2022 presentation to the Association of Air Pollution Control Agencies, EPA discussed the Proposed Rule, along with a spate of several other planned regulatory actions and guidance updates related to the major and minor NSR permitting program and its Title V permitting program.
EPA will accept comments on the Proposed Rule until December 13, 2022, on the Federal e-rulemaking portal (www.regulations.gov).
If you have any questions about the Proposed Rule or submission of comments to EPA, please contact Gary E. Steinbauer at (412) 394-6590 or gsteinbauer@babstcalland.com, Gina N. Falaschi at (202) 853-3483 or gfalaschi@babstcalland.com, or Christina Puhnaty at (412) 394-6514 or cpuhnaty@babstcalland.com.
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Reprinted with permission from the November 2022 issue of The PIOGA Press. All rights reserved.
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Smart Business
(By Sue Ostrowski featuring Chris Farmakis and Mike Matesic)
Finding the right match between investors and businesses needing capital can be hit or miss. How can investors reduce the challenges they face in identifying potential investment opportunities, and how can growing businesses attract the right partner?
“One of the most common barriers to bringing companies and investors together is mismatched expectations, where investors think a company is more mature, and the company is presenting itself that way, but after the investment, the investors find out the company is not as mature as they thought,” says Mike Matesic, President and CEO of Idea Foundry, which has helped launch more than 250 companies that have generated more than $1 billion in direct economic impact to the region over the last 20 years. Helping companies attract needed capital has been an essential part of Idea Foundry’s services and that required getting close to investors to understand their needs.
“The other challenge is that investors don’t like to immediately say ‘no’,” says Chris Farmakis, shareholder and Board Chair at law firm Babst Calland.
“It’s very dangerous for a business to think it’s getting funding and start spending before they have it,” says Farmakis. “It is very difficult for a company to recover when it finds out its promised funding fell through.”
An experienced funding program, however, can screen companies, ensure transparent communication, and bring companies together with a pool of investors.
Smart Business spoke with Farmakis and Matesic about how a third-party funding program can help both sides of the investment equation make the most of the deal.
What are the advantages of working with experienced organizations to find the right partner on both sides?
People want to invest in companies that sound exciting, but oftentimes it’s hard to find those at the right time and right deal terms. If you’re an investor looking for companies, you can’t spend all your time vetting and evaluating companies. Investing by individuals is inherently a risky, speculative venture. Affiliating with a competent investment group can lessen this risk.
IF Ventures is a group of successful entrepreneurs, experienced investors, and business owners. We seek companies with proven technology or products that have customers and revenue, and a strong management team. Many companies are just too early in the game to meet these criteria. And for more mature companies, better sources of capital probably exist. If a company meets all our criteria, we internally vet it. Only the best opportunities are brought to the investment group.
Businesses from any type of industry are eligible, from a traditional company to one focusing on technology or an innovative product.
Where is the void in the Pittsburgh market?
Pittsburgh does fairly well in the early stages of investments, attracting money from economic development organizations, friends and family, to get something going. It also does well after the company has matured to the point where it can attract private equity. But in that middle space, the angel space in which we transact, companies oftentimes run out of money and time, leading to the valley of death.
IF Ventures’ success hinges on the critical collaboration between the Idea Foundry and Babst Calland. Idea Foundry focuses on sourcing the deals, doing the initial due diligence and bringing companies forward. Babst Calland negotiates the investment terms for the investment group and attracts additional investors to the program.
The region continues to develop more business opportunities for investment. But the capital base hasn’t expanded accordingly. So, initiatives like IF Ventures are designed to attract additional investors and additional investment to companies to help the region broadly, and it couldn’t be timelier.
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